Note: EPA no longer updates this information, but it may be useful as a reference or resource.

Please see www.epa.gov/nsr/ for the latest information on EPA's New Source Review program.

June 14, 1991 Text File of Notice of Proposed Rulemaking on WEPCO signed on June 5,1991

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Friday June 14, 1991 FR Vol. 56, No 115 page 27630

ENVIRONMENTAL PROTECTION AGENCY

40 C.F.R. Parts 51, 52, and 60

[FRL ---------]

Requirements for Preparation, Adoption, and Submittal of Implementation
Plans; Approval and Promulgation of Implementation Plans; Standards
of Performance for New Stationary Sources.

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of Proposed Rule

SUMMARY: The applicability of the new source requirements of Title
I of the Clean Air Act (CAA) to physical or operational changes
at electric utility generating units is an issue of considerable
interest at this time because of the recent passage of the 1990
Clean Air Act Amendments (CAAA). Many utilities will be undertaking
major pollution control projects at their units in the next few
years. In enacting Title IV, Congress did not suspend any Title
I requirements for this work. However, the massive industry-wide
undertakings of pollution control projects warrants a clarification
of the new source review requirements of Title I. In particular,
New Source Review (NSR) provisions should not inadvertently bias
a utility towards or against any means of complying with the acid
rain provisions. The EPA believes the amendments proposed today
and the clarification of its current policy under its present NSR
regulations provide adequate assurances that utilities can undertake
Title IV pollution control projects without uncertainty as to the
applicability of the various Title I new source requirements. At
the same time, the applicability of existing new source regulations
to modifications has been the source of two recent federal appellate
decisions, Wisconsin Electric Power Co. v. Reilly, (WEPCO), 893
F.2d 901 (7th Cir. 1990), and Puerto Rican Cement Co. v. EPA, 889
F.2d 292 (1st Cir. 1989). As a result, EPA is today proposing clarifying
amendments to these regulations and confirming its policies regarding
of some of these provisions as they apply to utility projects pending
adoption of the proposed amendments.

The EPA today proposes to adopt a broad NSR exclusion for utility
pollution control projects and, until these proposed regulations
are adopted in final form, to adhere to its policy that new source
regulations already generally exclude coverage of pollution control
projects undertaken at electric utility units. Similarly, EPA today
proposes to adopt an "actual to future actual" methodology for determining
whether all other nonroutine physical or operational changes at
utilities (other than the replacement of a unit or addition of a
new unit) are subject to new source review under either prevention
of significant deterioration (PSD) or nonattainment provisions and
to maintain in the interim that this methodology is applied where
the unit has "begun normal operations." For those utility projects
which undergo PSD new source review, today's notice proposes a presumption
that for EPA-issued permits, "low-NOx burners" can satisfy the best
available control technology (BACT) requirements.

In addition, EPA also proposes to modify its regulations implementing
the modification provisions of the Title I new source performance
standards (NSPS) program to provide that a utility may use for its
pre-change baseline the highest hourly emissions rate achievable
at any time during the 5 years prior to the physical or operational
change. The EPA also proposes to modify its regulations to reflect
changes made by Congress in the 1990 Amendments to the applicability
of new source requirements to clean coal technology (CCT) and repowering
projects, and to "very clean" units.

DATES: Comments. Comments on the revisions proposed today must
be received on or before August 19, 1991. Public Hearing. A public
hearing is scheduled for 10:00 a.m., July 19, 1991, at the U.S.
Environmental Protection Agency, 401 M Street, S.W., Washington,
D.C. 20460. The hearing may be canceled if no speakers have requested
time to present their comments 15 days prior to the scheduled hearing
date. Written comments in lieu of testimony are encouraged. For
further information contact JoAnn Allman at (919) 541-5591.

ADDRESSES: Supporting information used in developing this proposed
rule is contained in docket A-90-06. This docket is available for
public inspection and copying between 8:30 a.m. and 3:30 p.m., weekdays
at EPA's Air Docket (LE-131), Room M-1500, 401 M Street S.W., Washington,
D.C. 20460. A reasonable fee may be charged for copying. FOR FURTHER
INFORMATION CONTACT: Chebryll Edwards, New Source Review Section
(MD-15), Office of Air Quality Planning and Standards, Research
Triangle Park, North Carolina 27711, (919) 541-2343.
SUPPLEMENTARY INFORMATION:

INTRODUCTION The EPA today proposes to amend its regulations
implementing the various Title I new source requirements governing
physical or operational changes at electric utility generating
units. Specifically, these proposed changes are being issued to
clarify the coverage of the NSPS, PSD and nonattainment preconstruction
review requirements of Title I of the Clean Air Act to projects
undertaken at electric utility steam generating units. Footnote
1.

The EPA proposes to amend the definition of "major modification"
in 40 C.F.R. Parts 51 and 52 to set forth the conditions under
which the addition, replacement or use at existing electric
utility generating units of any system or device whose primary
function is the reduction of air pollutants (including the switching
to a less polluting fuel where the primary purpose of the switch
is the reduction of air pollutants) will or will not subject
the source to preconstruction review. Specifically, EPA proposes
in PSD and nonattainment areas to adopt a regulatory exclusion
explicating its authority under the statutory definition of
"modification" and confirming EPA's current practice that pollution
control projects which "do not render the unit less environmentally
beneficial" are not "physical or operational changes," and hence,
are not "modifications" for the purposes of Parts C and D of
Title I and are not "major modifications" for the purposes of
EPA's regulations implementing those provisions. The EPA is
today also proposing to amend its PSD and nonattainment new
source review regulations (40 C.F.R. Parts 51 and 52) as they
apply to utilities to (1) clarify the NSR baseline for determining
whether a proposed physical or operational change will subject
a utility to the preconstruction review requirements of these
provisions; (2) set forth an actual to future actual methodology
for determining whether a physical or operational change is
subject to NSR; (3) provide further clarification of the existing
regulatory requirement that only those increases in emissions
that actually result from the physical change or change in the
method of operation can be considered in determining whether
the proposed change subjects the utility to NSR requirements;
and (4) implement sections 409 and 415 of Title IV of the Clean
Air Act Amendments of 1990 which create special NSPS treatment
for certain repowering projects and limited NSR exemptions for
temporary and permanent CCT projects, and for certain "very
clean" units. Finally, EPA is also proposing to amend its NSPS
regulations (40 C.F.R. Part 60) to allow a utility to use as
its pre-change baseline its highest hourly emissions rate achievable
during the 5 years prior to the proposed physical or operational
change. To the extent the proposed amendments implement existing
EPA policies, EPA will continue to administer its regulations
in a manner consistent with these policies pending adoption
of the regulations proposed today. Portions of the premable
of today's proposal set forth EPA's present policies under its
current regulations, and may be relied on as such pending final
action on today's proposal.

Today's proposal addressing pollution control projects and
other non-routine physical and operational changes at electric
utility units is timely for several reasons. First, the 1990
Clean Air Act amendments establish, in Title IV, a new control
scheme for addressing the acid rain problem which focuses exclusively
and immediately on utility power plants. Title IV will force
most electric utility steam generating units to undertake pollution
control projects and provides full flexibility to achieve compliance
without a bias towards or against any particular pollution control
method. Second, the Agency believes its extensive experience
with other non-routine physical and operational changes at such
units and the unique characteristics of the electric utility
industry (e.g., the general similarity of equipment within the
category and the extent of publicly available information) support
a revision to the new source review applicability criteria for
this source category. Further, while Congress did not make significant
changes in the NSR and NSPS statutory language in 1990, the
conference committee provided the following guidance to EPA
in its Joint Explanatory Statement:

"[T]he deletion of most provisions relating to the WEPCO decision
is not intended to affect or prejudice in any way the issues
or resolution of the WEPCO matter. At the same time, the conferees
urge a quick resolution of the WEPCO matter by EPA as appropriate."

Conference Comm., Joint Explanatory Statement of the Committee
of the Conference to Accompany S. 1630, Rep. 101-952, 101st. Cong.,
2nd Sess. (1990) pp. 344-45. In passing Title IV, Congress did
not suspend any requirements of title I. However Title I and Title
IV are clearly intended to work in concert, not conflict, and
today's ruling is intended to ensure that harmony.

BACKGROUND

The New Source Performance Standards, Prevention of Significant
Deterioration and Nonattainment Programs of Title I

Title I of the Clean Air Act has three programs specifically
designed to ensure that no new air pollution -- whether
from new sources or from modifications to existing sources
-- can be emitted unless the source complies with new source
requirements.

The 1970 Clean Air Act required EPA to promulgate technology-based
new source performance standards applicable to the construction
or modification of stationary sources that cause or contribute
significantly to air pollution which may reasonably be anticipated
to endanger public health or welfare. Clean Air Act ("CAA")
. 111(b)(1)(A), 42 U.S.C. 7411(b)(1)(A). The NSPS provisions
were "designed to prevent new air pollution problems" by
regulating newly-constructed sources and changes occurring
at existing sources that result in emissions increases.
See National Asphalt Pavement Assoc. v. Train, 539 F.2d
775, 783 (D.C. Cir. 1976); see also H.R. Rep. No. 1146,
91st Cong., 2d Sess. 3, reprinted in 1970 U.S. Code Cong.
& Admin. News 5356, 5358. Congress defined the term "modification"
as "any physical change in, or change in the method of operation
of, a stationary source which increases the amount of any
air pollutant emitted by such source or which results in
the emission of any air pollutant not previously emitted."
See CAA . 111(a)(4), 42 U.S.C. 7411(a)(4).

< In 1977, Congress adopted additional amendments to the
Clean Air Act. These changes included preconstruction permitting
requirements for major new and modified sources under two
programs, prevention of significant deterioration (PSD)
and nonattainment new source review (respectively, Parts
C and D of the Clean Air Act). Congress intended these programs
to apply generally where industrial changes might increase
pollution in an area. Alabama Power Co. v. Costle, 636 F.2d
323, 400 (D.C. Cir. 1979). Congress incorporated in Parts
C and D the same definition of the term "modification" set
forth in the NSPS provisions. See CAA . 111(a)(4), 169(2)(C),
and 171(4).

The NSR program for PSD (CAA .. 160-169) applies in attainment
areas, i.e., those areas which have attained the national
ambient air quality standards (NAAQS). To receive a PSD
permit, a prospective major new source or major modification
must (among other things) show that (1) it will not cause
or contribute to a violation of the available air quality
"increment" (designed to prevent ambient air quality from
deteriorating by more than certain specified levels), (2)
it will not cause or contribute to a violation of a NAAQS,
and (3) it will use the "best available control technology
(BACT)," which must be at least as stringent as any applicable
NSPS or hazardous pollutant standard under section 112 of
the Act.

Part D of the 1977 Amendments applies to nonattainment
areas, i.e., those areas which have not met the NAAQS under
section 109. To receive a permit in such areas, major new
and modified sources must (among other things) (1) obtain
emissions offsets, thereby assuring that reasonable progress
toward attainment of the NAAQS will occur, and (2) comply
with the "lowest achievable emission rate (LAER)." See CAA
. 171-173. Footnote 3

The Two-Step Test for Modifications

The modification provisions of the NSPS and NSR programs
are based on the broad NSPS definition of "modification"
in section 111(a)(4) of the Act. That section contemplates
a two-step test for determining whether activities at an
existing facility constitute a modification subject to new
source requirements. In the first step, which is largely
the same for NSPS and NSR, the reviewing authority determines
whether a physical or operational change will occur. Footnote
4. If so, the reviewing authority proceeds in the second
step to determine whether the physical or operational change
will result in an emissions increase over baseline levels.
In this second step, the applicable rules branch apart,
reflecting the fundamental distinctions between the technology-based
provisions of NSPS and the air quality-based provisions
of NSR.

Briefly, the NSPS program examines maximum hourly emissions
rates, expressed in kilograms per hour. Footnote 5. Emissions
increases for NSPS purposes are determined by changes in
the hourly emissions rates at maximum physical capacity.
On the other hand, the NSR regulations examine total emissions
to the atmosphere. For applicability determination purposes,
emissions increases under NSR are determined by changes
in annual emissions as expressed in tons per year (tpy).
Footnote 6.

Step One: Physical or Operational Change The EPA has always
recognized that the definition of physical or operational
change in section 111(a)(4) could, standing alone, encompass
the most mundane activities at an industrial facility (even
the repair or replacement of a single leaky pipe, or a change
in the way that pipe is utilized). However, EPA has always
recognized that Congress obviously did not intend to make
every activity at a source subject to new source requirements.

As a result, EPA has defined "modification" in the NSPS
and NSR regulations to include common-sense exclusions from
the "physical or operational change" component of the definition.
For example, both sets of regulations contain similar exclusions
for routine maintenance, repair, and replacement; for increases
in the hours of operation or in the production rate; and
for certain types of fuel switches. See e.g., 40 C.F.R.
52.21(b)(2)(iii) and 60.14(e). In addition, with respect
to pollution control equipment, the NSPS regulations contain
an exclusion for:

The addition or use of any system or device whose primary
function is the reduction of air pollutants, except when
an emissions control system is removed or is replaced by
a system which the Administrator determines to be less environmentally
beneficial.

40 C.F.R. 60.14(e)(5). As will be discussed, in recent individual
applicability determinations EPA has excluded pollution control
projects from NSR following a similar "environmentally beneficial"
test.

Step Two: Emissions Increases for NSPS Applicability

The EPA's NSPS regulations define the term "modification"
as any "physical or operational change to an existing facility
which results in an increase in the emission rate to the
atmosphere of any pollutant to which a standard applies."
See 40 C.F.R. 60.2 and 60.14. Under current NSPS regulations,
emissions increases, for applicability purposes, are calculated
by comparing the hourly emission rate, at maximum physical
capacity, before and after the physical or operational change.
That is, to determine whether a change to an existing facility
will increase the emissions rate, the existing NSPS regulations
authorize the use of an "emissions factor analysis," or
a materials balance, continuous monitoring, or manual emissions
test to evaluate emissions before and after the change.
40 C.F.R. 60.14(b)(2).

Absent the exclusions from modifications specified at 40 C.F.R.
60.14(e), any increase in emissions to the atmosphere over
the previous emissions rate will subject the unit to NSPS.
See 40 C.F.R. 60.14(a) and (b). In addition, under the "reconstruction
rules," physical or operational changes which would cost 50
percent or more of the total cost of a comparable new facility
may be classified as reconstructions (see 40 C.F.R. 60.15)
and are subject to NSPS as a new source, even if there is
no emissions increase.

Step Two: Emissions Increases Under NSR Requirements

Existing Regulations

The EPA's regulations implementing the PSD and nonattainment
programs require preconstruction review for sources
undertaking a "major modification," i.e., a physical
change or change in the method of operations "that would
result in a significant net emissions increase of any
pollutant subject to regulation under the Act." 40 C.F.R.
52.21(b)(2)(i), 52.24(f)(5). Footnote 7. A "net emissions
increase" is defined as the increase in "actual emissions"
from the particular physical or operational change together
with any other "contemporaneous" increases or decreases
in actual emissions. 40 C.F.R. 52.21(b)(3)(i). Footnote
8.

Applicability of the Act's new source review provisions
must be determined in advance of construction and is
pollutant specific. In cases involving existing sources,
this requires a pollutant-by-pollutant projection of
the emissions increases, if any, that will result from
the physical or operational change. Specifically, to
determine whether a proposed physical or operational
change will result in an emissions increase, the source
must first determine a baseline level of actual emissions.
The regulations define actual emissions on a particular
date as "the average rate, in tons per year, at which
the unit actually emitted the pollutant during a 2-year
period which precedes the particular date and which
is representative of normal source operation." 40 C.F.R.
52.21(b)(21)(ii) The Administrator "shall" allow use
of a different time period "upon a determination that
it is more representative of normal source operation."
Id. The EPA has typically used the 2 years immediately
preceding the physical or operational change to establish
the baseline. See 45 Fed. Reg. 52676, 52705, 52718 (1980).
However, it can allow the use of an earlier 2-year period
that is more representative of normal source operations.
For example, in WEPCO, EPA found the fourth and fifth
years prior to the modification more representative
of WEPCO's normal operations.

Because the applicability determination must be made
in advance of construction, EPA's NSR regulations provide
that when an emissions unit "has not begun normal operations,"
actual emissions equal the "potential to emit of the
unit." 40 C.F.R. 52.21(b)(21)(iv). This approach is
referred to as the actual to potential methodology.
This regulatory provision may be overcome -- and new
source review will not apply -- if the source owner
agrees, in a federally enforceable instrument -- not
to increase its actual emissions above baseline levels.
See e.g., 40 C.F.R. 52.21(b)(4).

The WEPCO and Puerto Rican Cement Decisions

As noted above, to calculate whether a physical or
operational change "increases" emissions, EPA regulations
require it to find an increase in actual emissions.
40 C.F.R. 52.21(b)(3)(i)(a). Where the emissions unit
has not "begun normal operations," EPA regulations recognize
that future actual emissions are difficult to predict
and employ future "potential" emissions as a proxy.
40 C.F.R. 52.21(b)(21)(iv). The linchpin under the current
regulations for predicting future emissions after a
modification is thus whether the unit has "begun normal
operations."

Two recent federal appellate court decisions have
addressed EPA's interpretation of the phrase "begun
normal operations." These decisions, Puerto Rican Cement
Co., Inc. v. US EPA, 889 F.2d 292 (1st Cir. 1989) and
Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901 (7th
Cir. 1990) ("WEPCO"), occasion a reexamination of EPA's
interpretation of the phrase, and of the usefulness
of the regulatory language itself. The meaning of the
phrase is highly fact-dependent, and these decisions
have created uncertainty regarding its application;
thus, as described later in this notice, EPA today proposes
to change its regulations for electric utility steam
generating units to employ a more useful criterion.

Both cases involved physical changes to existing emissions
units, but changes of differing extent, nature and result.
In Puerto Rican Cement, the owner of a cement plant
[Footnote 9] with several kilns sought to convert one
"wet" kiln into a "dry" kiln, and to combine that kiln
with another kiln. 889 F.2d at 293. The court observed
that the total production capacity of the renovated
single kiln would exceed the combined production capacity
of the previous two separate kilns by "about 35%." Id.
It noted that the renovated single kiln would employ
a different "cement-making process" than the original
kiln from which it was "converted," id. And it said
that the new kiln would be "more efficient [and] may
lead the firm to decide to increase the level of production,"
id. at 297 (emphasis in original). In reviewing EPA's
interpretation of "begun normal operations," the court
applied a highly deferential standard of review, since
an agency's interpretation of its own regulatory language
is typically given "'controlling weight unless it is
plainly erroneous or inconsistent with the regulation.'"
889 F.2d at 297, quoting Udall v. Tallman, 380 U.S.
1, 16-17 (1965) (citation omitted). The court concluded
that on the facts of the case, EPA's interpretation
that "normal operations" had not begun was not "arbitrary
or irrational," id. at 298, and hence EPA's application
of the actual-to-potential test to predict future emissions
was permissible.

In WEPCO, 893 F.2d 901, the Seventh Circuit was faced
with a different kind of modification. There renovations
were proposed for several older (35 to 50 year old)
coal-fired electric utility boilers. The physical changes
involved repair and replacement of turbine-generators,
steam drums and other major components. The EPA contended,
as it had in Puerto Rican Cement, that these changes
went beyond "normal operations" and thus warranted use
of future potential emissions as the test for an emissions
increase over past actual emissions. Here the court
disagreed with EPA's interpretation that "normal operations"
had not begun. The court coined the phrase "like-kind
replacement" to describe the type of renovation occurring
at the WEPCo plant. Id. at 917. The court described
a "like-kind replacement" as one that "does not 'change
or alter' the design or nature of the facility. Rather,
it merely allows the facility to operate again as it
had before the specific equipment deteriorated." Id.
at 908. In determining whether such a "like-kind replacement"
had "begun normal operations," id. at 917, the court
considered whether a "realistic assessment of [the]
impact [of the change] on ambient air quality levels
is possible.'" Id. at 917 (quoting Alabama Power Co.
v. Costle, 636 F.2d 323, 379 (D.C. Cir. 1979)). The
court said that where the renovations were "like-kind
replacements," EPA could not reasonably interpret its
regulations to say that such a unit was so different
that it has not "begun normal operations." Thus, it
concluded that the "actual-to- potential" test could
not be applied, under EPA's regulations, to units simply
undergoing "like-kind replacements." Footnote 10.

Neither of these decisions specified the threshold
for when a unit has "begun normal operations." Based
on these decisions, under its current regulations, EPA
must consider the facts of each case and apply the actual-to-potential
test only where the change is sufficiently significant
to support a finding that "normal operations" have not
"begun." At least for changes that are "like kind replacements,"
"normal operations" have begun, and the actual-to-potential
test is impermissible.

Because the "begun normal operations" criterion is
highly fact-dependent and its application is inherently
case-by- case, it may be an uncertain indicator of what
emissions test will be applied in a given instance.
However, EPA's extensive experience with electric utilities,
and the generally similar nature of operations within
this source category, provide EPA an adequate basis
on which to predict future actual emissions from such
units in most cases. Consequently, as explained below,
EPA is today proposing to revise its regulations to
apply the actual- to-actual test on all physical or
operational changes at electric utility steam generating
units save those that are an addition of a new unit
or constitute a replacement of an existing unit. Pending
final adoption of this new rule, EPA will continue to
apply an actual-to-actual test to units that undertake
"like-kind replacements" and other units which are found
to have "begun normal operations."

The Clean Air Act Amendments of 1990

New Source Review and the Acid Rain Provisions

The Clean Air Act Amendments of 1990, Pub L.
No. 101-549, 104 Stat. 2399 (Nov. 15, 1990), made numerous
changes in the nonattainment provisions of the Clean
Air Act and added a new title to address the problem
of acid rain. The amendments attack nonattainment problems
with a broad array of new requirements all designed
to bring all areas of the country into attainment with
the national ambient air quality standards for all pollutants.
These requirements include traffic reduction strategies,
use of alternative clean fuels, increased offset requirements
for stationary sources, and changes in the threshold
size of stationary sources subject to new source review.
A principal theme of the legislation is the establishment
of categories of nonattainment areas based on the severity
of the pollution problem. The more severe the area,
the more controls Congress required be imposed.

The Amendments also establish, in Title IV,
a new control scheme for addressing the acid rain problem.
The exclusive focus of this program is on utility power
plant emissions of sulfur dioxide and nitrogen oxides.
The 1990 Amendments require sulfur dioxide emissions
from utilities to be reduced by approximately 10 million
tons annually in two phases -- the first to take effect
in 1995, the second in 2000. A total of 111 specific
plants are targeted in Phase I, and will be required
to reduce their SO2 emissions to specified emissions
limits. In Phase II, these plants, and almost all others,
are subject to even lower SO2 emissions limits. This
reduction program is to be implemented through a new
market-based system under which emissions allowances
reflecting the required reduction in current emissions
are allocated to existing utility plants. Plant owners,
who are required to hold allowances equal to their actual
emissions, are then free to trade these allowances.
Thus, the emissions of individual units may vary from
the initial allocation of allowances, but aggregate
emissions are always held to the program's overall target
level. This program will provide powerful incentives
to sources to undertake pollution control projects.

Because of these requirements, many of the plants
subject to Phase I controls must make compliance decisions
within the next year in order to assure that the complicated
control equipment that may be necessary to meet Phase
I standards is in place by the 1995 deadline. In enacting
Title IV, Congress did not suspend any Title I requirements
for this work. However, the massive industry-wide undertakings
of pollution control projects warrants a clarification
of the new source review requirements of Title I. In
particular, New Source Review (NSR) provisions should
not inadvertently bias a utility towards or against
any means of complying with the acid rain provisions.
The EPA believes the amendments proposed today and the
clarification of its current policy under its present
NSR regulations provide adequate assurances that utilities
can undertake Title IV pollution control projects without
uncertainty as to the applicability of the various Title
I new source requirements.

Repowering and CCT Projects

In Title IV of the 1990 Amendments, which creates
the acid rain program, Congress made changes in the
applicability of new source requirements to changes
involving repowering and Clean Coal Technology (CCT)
projects.

Section 409 grants an extension of the acid rain
controls deadline to sources that seek to comply with
the acid rain reductions by repowering a unit with qualifying
clean coal technology. Section 402(12) defines repowering
as:

[The] replacement of an existing coal-fired boiler
with one of the following clean coal technologies: atmospheric
or pressurized fluidized bed combustion, integrated
gasification combined cycle, magnetohydrodynamics, direct
and indirect coal-fired turbines, integrated gasification
fuel cells, or as determined by the Administrator, in
consultation with the Secretary of Energy, a derivative
of one or more of these technologies, and any other
technology capable of controlling multiple combustion
emissions simultaneously with improved boiler or generation
efficiency and with significantly greater waste reduction
relative to the performance of technology in widespread
commercial use as of the date of enactment of the Clean
Air Act Amendments of 1990. Notwithstanding the provisions
of section 409(a), for the purpose of this title, the
term 'repowering' shall also include any oil and/or
gas-fired unit which has been awarded clean coal technology
demonstration funding as of January 1, 1991, by the
Department of Energy.

See CAA .. 402(12) and 409(a).

Congress provided that repowering projects that
qualify for a Phase II compliance extension would also
be exempt from NSPS requirements, so long as the repowering
"does not increase actual hourly emissions for any pollutant
regulated under the Act." See CAA . 409(d). An operator
can qualify for the 3-year extension of the Phase II
emissions limitation by demonstrating (by December 31,
1997) to the permitting authority that one or more units
will be repowered with a qualifying clean coal technology
to meet the Title IV restrictions. The operator must
provide, no later than January 1, 2000, additional documentation
of the repowering project including a preliminary design
and engineering effort for the project and a binding
contract for the majority of the equipment needed, as
well as any additional information the reviewing authority
requires.

Today's proposal also implements an exemption
from new source requirements for CCT demonstration projects
created by Congress in section 415 of Title IV of the
1990 Amendments. In these provisions, CCT is defined
as any technology not in widespread use on the date
of enactment that achieves significant reductions in
SO2 or nitrogen oxides (NOx) emissions associated with
burning coal in the generation of electricity, process
steam, or industrial products. See CAA . 415(a). A CCT
"demonstration project" is a project funded under DOE's
CCT program or a similar project funded by EPA. Footnote
11.

Repowering projects that are awarded funding
from the Department of Energy (DOE) as permanent CCT
demonstration projects (or similar projects funded by
EPA) are exempt from NSPS and PSD requirements so long
as potential emissions (see 40 C.F.R. 52.21(b)(4)) from
the unit do not increase as a result of the project.
CAA . 415(b)(3). These funded projects may still be
required to comply with the nonattainment NSR provisions
of Title I of the Act, unless they are excluded as pollution
control projects.

The installation, operation, cessation, or removal
of a temporary CCT demonstration project that is operated
for 5 years or less is exempt from NSPS and both PSD
and nonattainment new source requirements. See CAA 415(b)(2).
However, the facility still must comply with the applicable
SIP and other requirements necessary to attain and maintain
the NAAQS.

Finally, in section 415(c), Congress provided
an exemption from NSPS and PSD for the reactivation
of "very clean units" otherwise in compliance with the
Act that had been shut down for at least the 2 years
prior to enactment of the 1990 Amendments and that,
prior to the shutdown, had been equipped with pollution
controls with a removal efficiency of at least 85 percent
for sulfur dioxide and 98 percent for particulates,
and had been equipped with low-NOx burners.

DISCUSSION

Pollution Control Projects

Proposed Regulatory Changes for Pollution Control Projects

The EPA proposes to amend its PSD and nonattainment
regulations as they pertain to utility pollution control
projects by exercising its authority under the statutory
definition of "modification" and confirming the Agency's
current policy that such projects are not subject to
NSR unless they render the unit less environmentally
beneficial. Generally, pollution control projects at
existing stationary sources are not major modifications
subject to new source review requirements for the simple
reason that they do not result in an increase in actual
emissions. In addition, EPA has always recognized that
Congress did not intend that every activity at an existing
facility be considered a physical or operational change
for purposes of the new source review. Footnote 12.

The EPA is today proposing to adopt revisions to its
PSD and nonattainment regulations for the addition,
replacement or use at an existing electric utility steam
generating unit of any system or device whose primary
function is the reduction of air pollutants (including
the switching to a less-polluting fuel where the primary
purpose of the switch is the reduction of air pollutants).
Under today's proposal, a utility pollution control
project will not be treated as a physical or operational
change unless the project renders the unit less environmentally
beneficial.

As indicated above, the key to this addition to the
list of exclusions from the term physical or operational
change is EPA's judgment that Congress did not intend
that pollution control projects be considered the type
of activity that should trigger NSR. The EPA is today
issuing regulatory language to explicate and formalize
its statutory authority to exclude pollution control
projects under the NSR provisions. In 1977, when Congress
enacted the NSR provisions of the Act, it provided that
the term "modification" in NSR shall have the same meaning
as the term "modification" under NSPS. See .. 169(2)(c),
171(4). At the time, regulations promulgated under the
NSPS provisions defining "modification," provided that
the term "modification" does not include:

The addition or use of any system or device whose primary
function is the reduction of air pollutants, except
when an emissions control system is removed or is replaced
by a system which the Administrator determines to be
less environmentally beneficial.

40 C.F.R. 60.14(e)(5). In 1978, EPA noted that "in adding
section 169(2)(c) to the Act, Congress indicated that
it intended to conform the meaning of 'modification' to
'usage in other parts of the Act.' 123 Congr. Rec. H11955,
11957 (Nov. 1, 1977)." 43 Fed. Reg. 26396 (June 19, 1978).
Thus, just as EPA had the statutory authority to exclude
pollution control projects by regulation from NSPS, the
statutory authority exists for EPA to explicate by regulation
an exclusion for pollution control projects from Parts
C and D of Title I.

As discussed in greater detail in a subsequent section,
this exclusion under NSR reflects the existing regulatory
exclusion for pollution control activities under NSPS
regulations, and several recent case-specific nonapplicability
determinations under the new source review programs.
The NSPS regulatory exclusion contains the proviso that
the replacement of a pollution control system or device
cannot be less "environmentally beneficial" to qualify
for the exclusion. See 40 C.F.R. 60.15(e)(5). With respect
to new source review, today's proposal adopts a similar
regulatory exclusion for pollution control projects
in the PSD and nonattainment context. The major difference
in the proposed NSR exclusion is that it would apply
the "not less environmentally beneficial" test to the
addition and use, as well as the replacement, of a pollution
control system or device. This change reflects the distinct
air quality component of the PSD and nonattainment programs.
By focusing on whether a pollution control project is
a physical or operational change within the meaning
of the new source review regulations, today's ruling
avoids the need to undertake a quantitative emissions
increase calculation in every case, as would be necessary
if such projects were deemed to be physical or operational
changes. The EPA expects that most, if not all, pollution
control projects will reduce net actual emissions. Nevertheless,
the Administrator's authority to consider individual
pollution control projects provides an adequate opportunity
to determine that a pollution control project would
somehow result in an adverse environmental impact and
thus conclude that the project renders the unit less
environmentally beneficial, and is therefore a physical
or operational change that may be subject to NSR.

For the purposes of this proposal, a pollution control
project refers to a project undertaken at a utility
unit for purposes of reducing emissions from such unit.
These changes are limited to the installation of conventional
or innovative emissions control equipment, including,
but not limited to, installation of conventional and
advanced flue gas desulfurization, sorbent injection
for SO2 and NOx controls, electrostatic precipitators,
and projects undertaken to accommodate switching to
a less polluting fuel, including natural gas or coal
re-burning, co-firing of natural gas and other fuels
for the purpose of controlling SO2 and NOx emissions.

Likewise, any activity that is necessary to accommodate
switching to a less polluting fuel is considered to
be part of the pollution control project. In some instances,
this may involve changes to the pollution generating
equipment (e.g., boiler), but only if the changes are
necessary to maintain the normal operating capability
of the unit at the time of the project, where the capability
would otherwise be impaired as a result of the fuel
switch. For example, an electric utility steam generating
unit that switches from a higher sulfur bituminous coal
to a low-sulfur subbituminous coal may need to make
certain changes to the boiler in order to avoid derating
the unit.

Changes that are intended primarily to restore original
capacity or to improve the operational efficiency of
the facility are not considered to be part of a pollution
control project for purposes of this proposal. Such
changes are addressed elsewhere in this proposal. Also,
the source still must comply with all applicable SIP
limits and requirements, permit conditions and applicable
NAAQS or PSD increment limits.

As proposed, this pollution control project exclusion
will not extend to source categories other than electric
utility steam generating units. The EPA has so limited
this provision because, in contrast with a general lack
of experience with other industries, EPA has extensive
experience in addressing new source applicability issues
regarding pollution control projects in the utility
industry. That experience has led EPA to conclude that
pollution control projects in the utility industry are
generally environmentally beneficial.

Additional Modeling Requirements A proposed pollution
control project or physical or operational change cannot
result in an emissions increase that will cause or contribute
to a violation of a national ambient air quality standard,
PSD increment, or visibility limitation. See CAA .. 110(a)(2)(c),
165, 169A(b), 173. The pollution control projects exclusion
does not authorize any significant net increase in emissions
that would have this proscribed impact. It is possible
that a pollution control project, while not causing any
increase in maximum hourly emissions, will cause a significant
net increase in actual emissions, which in turn could
cause or contribute to the violation of a National Ambient
Air Quality Standards (NAAQS), increment or visibility
limitation. For this reason, under today's proposal, the
reviewing authority may require a source to perform an
air quality impact analysis (modeling) whenever 1) it
has reason to believe that a proposed change will result
in a significant net increase in actual emissions of any
criteria pollutant over levels used for that source in
the most recent air quality impact analysis and 2) it
has reason to believe that such an increase would cause
or contribute to a violation of a NAAQS, increment or
visibility limitation. If this modeling indicates that
this increase in emissions will cause or contribute to
a violation of any ambient standard, PSD increment or
visibility limitation, the pollution control exclusion
does not apply.

The EPA's Existing Policy Regarding pollution Control
Projects

As noted above, generally pollution control projects
at existing stationary sources are not major modifications
subject to new source review because they do not usually
result in an increase in actual emissions, and EPA believes
that, in general, pollution control projects were not
intended by Congress to be considered physical or operational
changes for purposes of NSR.

The EPA currently applies its PSD regulations in harmony
with its NSPS regulations, which exclude most pollution
control projects. See 40 C.F.R. 60.14(e)(5). In 1977,
Congress incorporated the NSPS definition of modification
into the PSD and nonattainment statutes. CAA .. 111(a)(4),
169(a)(c), 171(4). In addition, the legislative history
reflects that, as a general matter, Congress intended
to conform the meaning of "modification" for PSD purposes
to the usage under the NSPS program. See 123 Cong. Rec.
H11957 (November 1, 1977). The EPA reiterated this view
in 1978. See 43 FR 26396, June 19, 1978. Subsequently,
EPA interpreted its NSR regulations to incorporate the
NSPS pollution control project exclusion. [Footnote
13] The EPA later voiced concern about incorporating
the precise NSPS pollution control language in the NSR
context absent explication through notice-and-comment
rulemaking largely because of the ambient air quality
component of NSR that is absent from the NSPS program.
[Footnote 14] In recent years however, EPA has consistently
excluded pollution control projects from NSR provided
that the proposed project would be environmentally beneficial,
taking into account ambient air quality. [Footnote 15]
In light of the Title IV requirements and other provisions
of the Clean Air Act Amendments of 1990, EPA confirms
that it will continue to consider the overall environmental
consequences of pollution control projects for NSR applicability
on an interim basis pending final action on the proposed
regulatory exclusion for pollution control projects.
By its nature, a determination of whether or not a project
renders a unit less environmentally beneficial involves
case-by-case assessment of its net emissions and overall
impact on the environment. In making such assessments,
EPA must consider the overall emissions before and after
the project, as well as any other relevant environmental
factors. As a result, no single factor can be identified
in advance for purposes of making this determination.

Representative Actual Annual Emissions As described above,
EPA proposes to revise its methodology for calculating emissions
increases at electric utility steam generating sources. The
EPA proposes to compare actual emissions before and after
changes for all physical or operational changes at an existing
electric utility steam generating unit other than the addition
of a new unit or the replacement of an existing unit. Under
today's action, EPA proposes to consider a unit to be replaced
if it would constitute a reconstructed unit within the meaning
of 40 C.F.R. 60.15. Since there is no relevant operating history
for wholly new units and replaced units, it is not possible
to reasonably project post-change utilization for these units,
and hence, their future level of "representative annual actual
emissions." For other changes, past operating history, and
other relevant information, provides a basis for reasonable
projections.

As proposed today, the "representative actual annual emissions"
methodology requires the utility to compare its baseline
emissions with its future actual emissions to determine
if the proposed change will increase actual emissions. The
EPA's existing regulations define baseline emissions as
"the average rate, in tons per year, at which the unit actually
emitted the pollutant during a 2-year period which precedes
the particular date and which is representative of normal
source operation." See, e.g., 40 C.F.R. 52.21. The Administrator
"shall" allow use of a different time period "upon a determination
that it is more representative of normal source operation."
Id. Although not required by the regulations, EPA has historically
used the 2 years immediately preceding the proposed change
to establish the baseline. (See 45 Fed. Reg. 52676, 52705,
52718 (1980).) However, in some cases it has allowed the
use of earlier periods. For example, in WEPCO, EPA found
the fourth and fifth years prior to the modification more
representative of WEPCO's normal operations since the source's
capacity was reduced due to physical problems. The EPA proposes
today to retain this regulatory language, but to adopt a
new presumption regarding its implementation.

Under today's action, the Administrator will presume that
any 2 consecutive years within the 5 years prior to the
proposed change is representative of normal source operations
for a utility. This presumption is consistent with the 5-year
period for "contemporaneous" emissions increases and decreases
in 40 C.F.R. 52.21(b)(3)(i)(b). [Footnote 16] Source owners
or operators desiring to use other than a 2-year period
or a baseline period prior to the last 5 years may seek
the Administrator's specific determination that such period
is more representative of normal operations. Footnote 17

The future actual projection is the product of: (1) the
hourly emissions rate, which is based on the unit's physical
and operational capabilities following the change and federally-
enforceable operational restrictions that would affect the
hourly emissions rate following this change; and (2) projected
capacity utilization, which is based on (a) the unit's historical
annual utilization, and (b) all available information regarding
the unit's likely post-change capacity utilization. [Footnote
18] The projection of post-change capacity utilization for
applicability purposes should be based on a projection of
utilization for a period after the physical or operational
change. Specifically, EPA today proposes to allow sources
to base the projection of utilization on the 2 years after
the change, or a different consecutive 2-year period within
the 10 years after the change, where the Administrator determines
that such period is more representative of normal source
operations.

The Causation Requirement

The NSR regulatory provisions require that the physical
or operational change "result in" an increase in actual
emissions in order to consider that change to be a modification.
See e.g. 40 C.F.R. 52.21(2)(i). In other words, NSR will
not apply unless EPA finds that there is a causal link between
the proposed change and any post-change increase in emissions.
The EPA today proposes to amend its rules to clarify this
provision in the context of modifications at electric utility
steam generating units.

Under these proposed regulations, any emissions increase
attributable to a physical or operational change, such as
a physical or operational change that significantly alters
the efficiency of the plant, (see, Puerto Rican Cement,
889 F.2d at 297-8), must continue to be included in the
post-change emissions calculation. Today's proposal makes
clear that where increased operations are in response to
independent factors, such as system-wide demand growth,
which would have occurred and affected the unit's operations
even in the absence of the physical or operational change,
such increases do not result from the change and shall be
excluded from the projection of future actual emissions.
Thus, in assessing whether the proposed change will result
in an increase in actual emissions, utilities need not include
in their projection of post-change utilization that portion
of the increased rate of utilization, if any, due to factors
unrelated to the physical or operational change, such as
an increase in projected capacity utilization due to the
rate of electricity demand growth for the utility system
(of which that source is a member) as a whole.

Under this proposal, during a representative baseline
period (see supra), the plant must have been able to accommodate
the projected demand growth physically and legally even
absent the particular change. Increased operations (and
resultant increases in actual emissions) that could not
physically and legally be accommodated but for the proposed
physical or operational change should be considered to result
from the change.

Repowering

As previously mentioned, Title IV of the 1990 Amendments
grants special treatment to utilities that seek to comply
with the mandated acid rain reductions by repowering a unit
with qualifying clean coal technology. 1990 Amendments ..
402(12), 409(a). Specifically, repowering projects that
qualify for a Phase II compliance extension will also be
exempt from NSPS requirements, so long as the repowering
"does not increase actual hourly emissions for any pollutant
regulated under the Act." . 409(d). The EPA interprets the
requirement that the repowering not lead to an increase
in "actual hourly emissions" as an expression of Congressional
intent that with respect to repowering projects, EPA should
use the same general approach to determining applicability
as it has for other physical or operational changes, discussed
above. Accordingly, EPA today proposes rules that provide
that a repowering project which results in an increase over
baseline in a unit's post- modification hourly emissions
will not be eligible for this limited NSPS exemption.

The proposed NSPS exemption applies to repowering of existing
units at existing sources, so long as the project qualifies
for the Phase II extension and satisfies the "actual hourly
emissions" increase test. Because of this provision, the
reconstruction limitations specified in 40 C.F.R. 60.15
are not applicable to qualifying repowering projects. However,
no special treatment can be afforded to a new unit which
is located at a different site than the existing unit it
replaces. See CAA . 409(d).

Pursuant to section 409(e), EPA will provide expedited
NSR processing for repowering projects and will encourage
State permitting authorities to do the same.

Clean Coal Technology Demonstration Projects

Today's notice also proposes rules implementing the new
CCT exemption created by the 1990 Amendments. For the purposes
of this proposal, temporary CCT demonstration projects are
defined as those CCT demonstration projects lasting 5 years
or less. Title IV gives these projects an exemption from
NSPS, PSD and nonattainment requirements. Id., . 415(b)(2).
However, the facility would still be subject to any applicable
SIP and must comply with any other requirements necessary
to attain and maintain NAAQS. This ruling proposes to implement
this provision and clarifies that EPA considers the 5 year
period as starting on the date of startup (as defined in
40 C.F.R. 60.2). A temporary demonstration project may be
converted to a permanent status at any time, provided it
meets all the requirements that apply to a permanent CCT
project criteria at the time of conversion.

Further, EPA proposes that at the end of a temporary project,
the facility must be returned to pre-demonstration conditions
and hourly emission rates (or lower). The return of the
facility to its pre-demonstration physical and operational
condition would not result in the loss of the actual emissions
margin between pre-demonstration actual emissions rate and
SIP- allowable emissions rates for that facility. Rather,
the facility would be treated as if the temporary demonstration
project had never occurred. [Footnote 19]

This proposal does not extend to emissions increases that
are unrelated to the conduct of temporary demonstration
projects. The EPA considers emissions increases (above the
pre- demonstration levels) that are attributable to physical
or operational changes, other than those necessary to restore
that unit to its pre-demonstration condition, to be beyond
the scope of the Congressional exemption.

Today's action also proposes to implement an exemption
from NSPS and PSD requirements for repowering projects which
are awarded funding from the DOE as permanent CCT demonstration
projects (or similar projects funded by EPA) so long as
potential emissions (see 52.21(b)(4)) from the unit do not
increase as a result of the project. . 415(b)(3). However,
repowering projects that qualify as pollution control projects
will be treated as other pollution control projects for
the purposes of the nonattainment provisions of Title I
of the Act.

Finally, today's proposal would implement the statutory
exemptions in section 415(c). In that section, Congress
provided an exemption from NSPS and PSD for the reactivation
of "very clean units" otherwise in compliance with the Act
that had been shut down for at least the 2 years prior to
enactment of the 1990 Amendments and that, prior to the
shutdown, had been equipped with pollution controls with
a removal efficiency of at least 85 percent for sulfur dioxide
and 98 percent for particulates, and had been equipped with
low-NOx burners. This exemption appears to have been narrowly
tailored and is not expected to have widespread applicability.

Because these proposed rules merely implement straight-
forward statutory exemptions that were immediately effective
upon passage of the 1990 Amendments, EPA intends, as a matter
of statutory interpretation, to follow the policies set
forth in today's proposal pending final action.

Calculation of NSPS Baseline

As discussed in section II of this notice, "any physical
or operational change to an existing facility which results
in an increase in the emission rate to the atmosphere of
any pollutant to which a standard applies" is a modification
for NSPS applicability purposes See 40 C.F.R. . 60.14(a).
The NSPS regulations implementing this general definition
focus on increases in hourly emissions, expressed in kilograms
of pollutant discharged per hour. To determine if an increase
in hourly emissions has occurred at a unit, a pre-change
baseline must be established. Under current regulations,
the emissions rate before and after a physical or operational
change is evaluated at each unit by comparing the current
hourly potential emissions at maximum operating capacity
to hourly emissions at maximum capacity after the change.
In this calculation, the reviewing authority disregards
the unit's maximum design capacity. [Footnote 20] The original
design capacity of a unit, to the extent it differs from
actual maximum capacity at the time that the baseline is
established due to physical deterioration of the facility,
is immaterial to this calculation. Today EPA is proposing
that, for an existing electric utility steam generating
unit, the pre-change baseline for NSPS applicability purposes
shall be calculated using the highest hourly emissions rate
achievable at any time during the 5 years prior to the change.
This proposal retains the key concept in existing regulations
that the baseline be determined during a period that is
roughly contemporaneous with the proposed change at the
affected facility. The EPA believes that this proposed revision,
while modest, is still necessary to avoid the current regulation's
undue emphasis on the physical condition of the affected
facility immediately prior to the change. Today's more flexible
provision enables units to establish a baseline that is
representative of its physical and operational capacity
in recent years, while still precluding the use of a baseline
tied to original design capacity, which as noted above may
bear no relationship to the facility's capacity in recent
years.

Without this revision, the NSPS regulations may unduly
burden utilities undertaking physical or operational changes
in conjunction with the acid rain program. For instance,
if a unit has broken down and is in need of repairs, the
utility's baseline will be artificially low. The proposed
change will allow utilities to demonstrate that an earlier,
higher capacity was more representative of the unit's maximum
hourly emissions rate.

Utility BACT Presumption for NOx

In today's notice, EPA proposes to adopt a presumption
that, in the case of PSD permits issued by EPA under 40
C.F.R. 52.21, best available control technology (BACT) for
emissions of nitrogen oxides from existing coal-fired electric
utility steam generating units undergoing a modification
is the technology required under section 407 of the Clean
Air Act. In general, this will call for the use of combustion
modification and/or low- NOx burners or similar, cost-effective
technologies by those utilities required to obtain PSD permits
for NOx emissions following final action on today's proposal.

In brief, section 407 requires most utility units subject
to phase I and phase II to meet NOx emission limitations
on the same date as the phase I or phase II SO2 emission
limitations become effective. The Administrator must establish
annual emission limitations (based on rates listed in the
section) for tangentially-fixed boilers and dry bottom wall-fired
boilers within 18 months of enactment. These limitations
must be achievable with low-NOx burner technology. CAA .
407(b)(1). The Administrator must promulgate annual emission
limitations for all other boilers by January 1, 1997, based
on a "best system of continuous emission reduction . . .
which is comparable to the cost of" low-NOx burners. By
the same date, the Administrator may make the rates for
boiler types identified in section 407(b)(1) more stringent
if more effective low-NOx burner technology is available.
CAA . 407(b)(2).

Low-NOx burners are commercially available and can be
retrofitted on many boiler types, providing a high degree
of emissions reduction at relatively low costs. Depending
on boiler type, low-NOx burners can reduce emissions of
NOx by approximately 20 to 60 percent. Again depending on
boiler type and other factors, the cost of replacing conventional
burners with these controls is in the range of $8.00 to
$16.00 per kilowatt.

Other NOx control technologies are being developed for
retrofitted use on at least some coal-fired electric utility
units, and thus can provide a much greater degree of emissions
reductions. These include selective noncatalytic reduction
(SNCR or "thermal de-NOx") and selective catalytic reduction
(SCR). (In addition, DOE has funded two new technologies
under its CCT demonstration program which are designed for
the simultaneous removal of SO2, NOx and particulate matter
that may become commercially "available" in the future.)
[Footnote 20] However, SNR and SNCR are not in use in this
country as retrofit technologies for coal-fired boilers,
and the DOE sponsored projects have not yet been demonstrated.
Current estimates of control costs for these technologies
are much higher than for low-NOx burners, especially when
considered in the context of retrofitting existing units.

The EPA has in the past issued guidance documents effectively
creating presumptions that certain technologies constituted
BACT for certain source categories. See Memorandum, Operation
Guidance on Control Technology for New and Modified Municipal
Waste Combustors, from Gerald A. Emison, Director, Office
of Air Quality Planning and Standards, EPA, June 26, 1987,
p. 5. The EPA believes it is appropriate to propose to do
so here as well in the case of low-NOx burners for modified
coal- fired utility boilers in light of the strong congressional
policy judgment favoring use of that technology for acid
rain control reflected in section 407.

Section 169(3) of the Act, 42 U.S.C. 7479(3) defines BACT
as:

an emissions limitation based on the maximum degree of reduction
of each pollutant subject to regulation under the Clean
Air Act emitted from or which results from any major emitting
facility, which the permitting authority, on a case-by-case
basis, taking into account energy, environmental, and economic
impacts and other costs, determines is achievable for such
facility through application of production processes and
available methods, systems, and techniques, including fuel
cleaning, clean fuels, or treatment or innovative fuel combustion
techniques for control of each such pollutant. In no event
shall application of "best available control technology"
result in emissions of any pollutants which will exceed
the emissions allowed by an applicable standard established
pursuant to section 7411 or 7412 of this title. Emissions
from any source utilizing clean fuels, or any other means,
to comply with this paragraph shall not be allowed to increase
above levels that would have been required under this paragraph
as it existed prior to enactment of the Clean Air Act Amendments
of 1990.

The BACT provision reflects congressional intent both
to grant permitting authorities broad discretion to weigh
the statutory factors as they see fit in reaching a final
substantive determination on BACT and to create a procedural
methodology that would provide a mechanism for stimulating
the widespread use of effective pollution control technologies.
[Footnote 21]

The EPA believes that today's proposed presumption is
consistent with BACT requirements because it does not purport
to relieve the permitting authority of the obligation to
weigh the statutory factors in reaching BACT determinations.
Rather, it reflects an exercise of policy judgment by EPA
where it is the permitting authority that in most cases
a BACT analysis of currently demonstrated technologies for
retrofitting existing utility boilers would lead to the
selection of low NOx burners and/or combustion modifications
identified in section 407(b)(1).

Although EPA has authority under the present regulations
to create this presumption regarding BACT for NOx, EPA is
soliciting comment prior to adopting such a presumption
in order to obtain the views of the public on the policy
conclusions discussed above.

This proposed presumption would not apply in States with
PSD programs that have been incorporated into state implementation
plans under regulations promulgated at 40 C.F.R. 51.166.
However, such States are encouraged to adopt this presumption
as a matter of state policy.

Applicability Determinations

In most instances, source owners or operators are able
to readily ascertain whether new source review requirements
apply to them. Consequently, in administering these requirements,
EPA does not require sources to obtain a formal applicability
determination before proceeding with construction. In keeping
with that practice, EPA will not require utilities to seek
applicability determinations under either the revised regulations
proposed today or the interpretations of existing regulations
contained in this preamble. Utilities in most cases can
readily ascertain how this notice will affect them. The
EPA anticipates, however, that questions will arise regarding
certain aspects of this proposal. Because some instances
involve discrete judgments, utilities may wish to obtain
determinations of applicability. The EPA will provide such
determinations upon request. Such requests should be submitted
together with appropriate documentation to the appropriate
permitting authority.

. ADMINISTRATIVE REQUIREMENTS

Docket

A docket has been established for this action under section
307(d)(1)(I) and (N) of the Clean Air Act, 42 U.S.C. 7607(d)(1)(I)
and (N). The docket is an organized and complete file of
all information considered in the development of this ruling.
The docket is intended to allow the public to identify and
locate documents related to this ruling. The docket number
for this ruling is A-90-06.

Paperwork Reduction Act

No additional public reporting burden will result from
this ruling. All information collection requirements of
the Federal NSR and NSPS regulations have been approved
by the Office of Management and Budget (OMB) under the provisions
of the Paperwork Reduction Act, 44 U.S.C. 3501, et. seq.,
and have been assigned OMB control numbers 2060-0003 for
NSR, and 2060-0023, 2060-0026 and 2060-0072 for NSPS. The
effect of this rule would be a reduction in paperwork related
to complying with NSR and NSPS requirements, since this
ruling provides additional clarification as to physical
and operation changes that may be excluded from these requirements.

OMB Review

Under Executive Order 12291 (E.O. 12291), EPA must judge
whether a rule is "major" and therefore subject to the requirement
of a regulatory impact analysis (RIA). This ruling is a
major rule. However, EPA has not prepared an RIA because
it will not result in any signification adverse environmental
effects and will reduce the economic costs of meeting the
requirements of the CAA. This ruling was submitted to the
OMB for review as required by E.O. 12291. Any written comments
from OMB to EPA and any EPA response to those comments are
included in Docket A-90-06.

Effective Date

Section 4(d) of the Administrative Procedures Act (APA),
5 U.S.C. 553(d), requires a 30-day waiting period before
making a substantive rule effective. Since the regulatory
revisions being proposed today are considered substantive,
they are subject to the notice-and-comment requirements
of the APA and will become effective only after public comments
have been received and considered, and final action has
been taken. The portions of this notice that merely confirm
EPA policy are effective immediately.

Regulatory Flexibility Act

This action is not subject to the certification provisions
of section 605(b) of the Regulatory Flexibility Act (RFA)
because this rule will result in a reduction of administrative
costs and no increase in control costs, therefore having
no significant impact on industry. List of Subjects

The proposed regulations define electric utility steam generating
units as any steam electric generating unit that is constructed
for the purpose of supplying more than one-third of its potential
electric output capacity and more than 25 MW of electrical output
to any utility power distribution system for sale. See, e.g.,
proposed 40 CFR 51.165(xx).

For the purposes of this notice, references to "new source
review" (or "NSR") refer to the preconstruction review requirements
of both Part C (PSD) and Part D (nonattainment) of the Clean Air
Act, unless otherwise indicated.

The 1970 Clean Air Act also included a provision applicable
to construction or modification of any stationary source. This
provision is presently set forth in section 110(a)(2)(C). Today's
notice does not propose to change the scope of the regulations
implementing this provision. See 40 CFR 51.160-164.

This is further described in section III.H below.

An hourly emissions rate may be determined by a stack test
or calculated from the product of the instantaneous emissions
rate, i.e., the amount of pollution emitted by a source, after
control, per unit of fuel combusted or material processed (such
as pounds of sulfur dioxide emitted per ton of coal burned) times
the production rate (such as tons of coal burned per hour). See
40 C.F.R. 60.14.

Annual emissions may be calculated as the product of the hourly
emissions rate times the utilization rate, expressed as hours
of operation per year, or as the product of an emissions factor
(e.g., from Compilation of Air Pollutant Emission Factors, AP-42,
4th Ed. and subsequent supplements) in units of mass emitted per
unit of process throughput times the annual throughput. See 40
CFR 52.21(b)(21).

The current PSD program is set forth in two sets of regulations.
One of the regulations cited (40 CFR 52.21) is part of the federal
PSD permit program which applies as part of a Federal implementation
plan for States that have not submitted a PSD program meeting
the regulatory requirements of 40 CFR 51.166 (standards for PSD
provisions in State implementation plans). In most States where
the federal requirements apply, EPA has delegated the authority
to implement the PSD program back to the State. Roughly two-thirds
of the States are implementing their own PSD program pursuant
to an EPA-approved state implementation plan. Sections 52.21 and
51.166 have identical modification provisions.

The EPA's regulations for nonattainment areas are set forth
at 40 CFR . 51.165, 52.24 and in Part 51, Appendix S. These
sections contain applicability provisions regarding modification
that are largely identical to those in the PSD provisions.

Roughly speaking, "contemporaneous" emissions increases or
decreases are those which have occurred between the date five
years preceding the proposed physical or operational change and
the date that the increase from the change occurs. 40 CFR 52.21(b)(3)(ii).
Once a modification is determined to be major, the PSD requirements
apply only to those specific pollutants for which there would
be a significant net emissions increase. E.g., 40 CFR 52.21(j)(3)
(best available control technology); 40 CFR 52.21(m)(1)(b) (air
quality analysis).

Puerto Rican Cement involved a cement plant, not an electric
utility, but the court's legal analysis of the phrase "begun normal
operations" in the current regulations is relevant to all facilities.

On remand, EPA employed an actual-to-future actual test, comparing
WEPCo's representative actual emissions for the baseline period
to estimated future actual emissions based on all the available
facts in the record.

Section 415(b)(1) defines a CCT project as a a project "using
funds appropriated under the heading 'Department of Energy-Clean
Coal Technology', up to a total amount of $2,500,000,000 for commercial
demonstration of clean coal technology, or similar projects funded
through appropriations for the Environmental Protection Agency."

For instance, EPA has specifically recognized that routine
maintenance, repair and replacement, and changes in hours of operation
or in the production rate are not considered a physical change
or change in the method of operation. See 40 CFR 52.21(b)(2)(iii),
52.24(f)(5)(iii), 51.165(a)(1)(v)(C)(1), 51.166(b)(2)(iii), and
60.14(e)(1).

This presumption does not apply to past modifications at an
emissions unit for the purpose of determining contemporaneous
emission changes at a source and cannot be used to extend the
five year period specified in that provision. See 40 CFR 52.21(b)(3)(1)(b).

The level of baseline emissions selected must be consistent
with current assumptions regarding the source's emissions that
are used under the state implementation plans (SIP) for planning
or permitting purposes. Thus, the source may not select a level
of baseline emissions higher than that used by the permitting
authority in issuing a PSD or other construction permit to a source
in the area, if such higher level would result in a NAAQS or increment
violation, or violate a visibility limitation.

In projecting future utilization and emissions factors, the
permitting authority may consider the company's historical operational
data, its own representations, filings with Federal, State or
local regulatory authorities, and compliance plans developed under
Title IV of the 1990 Amendments.

This would be the case even if there were small differences
in the post-demonstration physical and operational conditions
due to a technical inability to restore the unit to its precise
pre- demonstration condition, or due to normal variability in
the coal used. Thus, EPA would not seek to apply NSPS or NSR because
of a post-demonstration emissions increase attributable solely
to an increase in the hours of operation or production rate of
the unit (subject to the NSPS limitation that the production rate
increase must be accomplished without a capital expenditure).

See 39 Fed. Reg. 36,948 col. 1 (proposed rule). In WEPCO, the
utility contended that baseline capacity for the purpose of determining
whether an increase in emission rate occurs for purposes of an
NSPS modification is the original design capacity of the facility.
However, the court rejected WEPCO's argument that original design
capacity or past "representative" capacity, no longer achievable
at the plant, had to be used for the baseline emissions rate.

One technology -- low NOx/SOx Burner Retrofit -- is designed
specifically for cyclone boilers which cannot be retrofit with
low NOx burners while the other -- the Advanced Slagging Combustor
-- is applicable to a number of boiler types.

(C) A physical change or a change in the method of operation shall
not include:
* * * * *

(8) the addition, replacement or use of a pollution control
project at an existing electric utility steam generating unit,
unless the reviewing authority determines that such addition,
replacement, or use renders the unit less environmentally beneficial,
and except:

(i) when the reviewing authority has reason to believe that the
pollution control project would result in a significant net increase
in representative actual annual emissions of any criteria pollutant
over levels used for that source in the most recent air quality
impact analysis in the area conducted for the purpose of Title
I, if any, and

(ii) the reviewing authority determines that the increase
will cause or contribute to a violation of any ambient standard,
PSD increment, or visibility limitation.

(D) For any emissions unit (other than an electric utility steam
generating unit specified in paragraph (E) of this subsection) that
has not begun normal operations on a particular date, actual emissions
shall equal the potential to emit of the unit on that date.

(E) For an electric utility steam generating unit (other than
a new unit or the replacement of an existing unit) actual emissions
of the unit following the physical or operational change shall
equal the representative actual annual emissions of the unit.

(xx) "Electric utility steam generating unit" means any steam
electric generating unit that is constructed for the purpose of
supplying more than one-third of its potential electric output capacity
and more than 25 MW electrical output to any utility power distribution
system for sale. Any steam supplied to a steam distribution system
for the purpose of providing steam to a steam- electric generator
that would produce electrical energy for sale is also considered
in determining the electrical energy output capacity of the affected
facility.

(xxi) "Representative actual annual emissions" means the average
rate, in tons per year, at which the source is projected to emit
a pollutant for the two-year period after a physical change or change
in the method of operation of a unit, (or a different consecutive
two-year period within 10 years after that change, where the permitting
authority determines that such period is more representative of
normal source operations), considering the effect any such change
will have on increasing or decreasing the hourly emissions rate
and on projected capacity utilization. In projecting future emissions
the permitting authority shall:

(A) consider all relevant information, including but not limited
to, historical operational data, the company's own representations,
filings with the State or Federal regulatory authorities, and compliance
plans under Title IV of the Clean Air Act; and

(B) exclude, in calculating any increase in emissions that results
from the particular physical change or change in the method of
operation at an electric utility steam generating unit, that portion
of the unit's emissions following the change that is attributable
to an increase in projected capacity utilization at the unit that
is unrelated to the particular change, including any increased
utilization due to the rate of electricity demand growth for the
utility system as a whole.

(xxii) "Temporary clean coal technology demonstration project" means
a clean coal technology demonstration project that is operated for
a period of five years or less, and which complies with the State
implementation plan for the State in which the project is located
and other requirements necessary to attain and maintain the national
ambient air quality standards during the project and after it is terminated.

(xxiii) "Clean coal technology" means any technology, including
technologies applied at the precombustion, combustion, or post combustion
stage, at a new or existing facility which will achieve significant
reductions in air emissions of sulfur dioxide or oxides of nitrogen
associated with the utilization of coal in the generation of electricity,
or process steam which was not in widespread use as of November
15, 1990.

(xxiv) "Clean coal technology demonstration project" means a project
using funds (1) appropriated under the heading 'Department of Energy-Clean
Coal Technology,' up to a total amount of $2,500,000,000 for commercial
demonstration of clean coal technology, or (2) similar projects
funded through appropriations for the Environmental Protection Agency.
The Federal contribution for a qualifying project shall be at least
20 percent of the total cost of the demonstration project.

(xxv) "Reactivation of a very clean coal-fired electric utility
steam generating unit" means any physical change or change in the
method of operation associated with the commencement of commercial
operations by a coal-fired utility unit after a period of discontinued
operation where the unit:

(i) has not been in operation for the two-year period prior to the
enactment of the Clean Air Act Amendments of 1990, and the emissions
from such unit continue to be carried in the permitting authority's
emissions inventory at the time of enactment;

(ii) was equipped prior to shut-down with a continuous system
of emissions control that achieves a removal efficiency for sulfur
dioxide of no less than 85 percent and a removal efficiency for
particulates of no less than 98 percent;

(iii) is equipped with low-NOx burners prior to the time of
commencement of operations following reactivation; and

(iv) is otherwise in compliance with the requirements of the
Clean Air Act.

(xxvi)"Pollution control project" means any physical change or change
in the method of operation, at an existing electric utility steam
generating unit for purposes of reducing emissions from such unit.
Such changes are limited to:

(i) the installation of conventional or innovative pollution control
technology, including but not limited to advanced flue gas desulfurization,
sorbent injection for sulfur dioxide and nitrogen oxides controls
and electrostatic precipitators;

(ii) a physical change, or change in the method of operation,
to accommodate switching to a fuel which is less polluting than
the fuel in use prior to the change including, but not limited
to natural gas or coal re-burning, co-firing of natural gas and
other fuels for the purpose of controlling emissions;

(iii) a permanent clean coal technology demonstration project
conducted under Title II, section 101(d) of the Further Continuing
Appropriations Act of 1985 (section 5903(d) of title 42 of the
United States Code), or subsequent appropriations, up to a total
amount of $2,500,000,000 for commercial demonstration of clean
coal technology, or similar projects funded through appropriations
for the Environmental Protection Agency; or

(h) the addition, replacement or use of a pollution control project
at an existing electric utility steam generating unit, unless the
reviewing authority determines that such addition, replacement,
or use renders the unit less environmentally beneficial and except:

(a) when the reviewing authority has reason to believe pollution
control project would result in a significant net increase in
representative actual annual emissions of any criteria pollutant
over levels used for that source in the most recent air quality
impact analysis in the area conducted for the purpose of Title
I, if any, and

(b) the reviewing authority determines that the increase will
cause or contribute to a violation of any ambient standard,
PSD increment, or visibility limitation.

(i) any physical change or change in the method of operation at
an existing electric utility generating unit (other than the addition
of a new unit or the replacement of an existing unit) that would
not result in a significant net increase in representative actual
annual emissions of a regulated pollutant at the unit. (j) The installation,
operation, cessation, or removal of a temporary clean coal technology
demonstration project, provided that the project complies with:

(i) the State implementation plan for the State in which the project
is located; and

(ii) other requirements necessary to attain and maintain the
national ambient air quality standards during the project and
after it is terminated.

(k) The installation or operation of a permanent clean coal technology
demonstration project that constitutes repowering, provided that
the project does not result in an increase in the potential to emit
of any regulated pollutant emitted by the unit. This exemption shall
apply on a pollutant-by- pollutant basis.

(iv) For any emissions unit (other than an electric utility steam
generating unit specified in paragraph (v) of this subsection) that
has not begun normal operations on a particular date, actual emissions
shall equal the potential to emit of the unit on that date.

(v) For an electric utility steam generating unit (other than
a new unit or the replacement of an existing unit) actual emissions
of the unit following the physical or operational change shall
equal the representative actual annual emissions of the unit following
the physical or operational change.

(30) "Electric utility steam generating unit" means any steam
electric generating unit that is constructed for the purpose of
supplying more than one-third of its potential electric output
capacity and more than 25 MW electrical output to any utility
power distribution system for sale. Any steam supplied to a steam
distribution system for the purpose of providing steam to a steam-electric
generator that would produce electrical energy for sale is also
considered in determining the electrical energy output capacity
of the affected facility.

(31) "Pollution control project" means any physical change or
change in the method of operation at an existing electric utility
steam generating unit for purposes of reducing emissions from
such unit. Such changes are limited to:

(i) the installation of conventional or innovative pollution control
technology, including but not limited to advanced flue gas desulfurization,
sorbent injection for sulfur dioxide and nitrogen oxides controls
and electrostatic precipitators;

(ii) a physical change, or change in the method of operation,
to accommodate switching to a fuel which is less polluting than
the fuel in use prior to the change, including but not limited
to natural gas or coal re- burning, co-firing of natural gas
and other fuels for the purpose of controlling emissions;

(iii) a permanent clean coal technology demonstration project
conducted under Title II, section 101(d) of the Further Continuing
Appropriations Act of 1985 (section 5903(d) of title 42 of the
United States Code), or subsequent appropriations, up to a total
amount of $2,500,000,000 for commercial demonstration of clean
coal technology, or similar projects funded through appropriations
for the Environmental Protection Agency, or

(32) "Representative actual annual emissions" means the average
rate, in tons per year, at which the source is projected to emit
a pollutant for the two-year period after a physical change or change
in the method of operation of a unit, (or a different consecutive
two-year period within 10 years after that change, where the reviewing
authority determines that such period is more representative of
normal source operations), considering the effect any such change
will have on increasing or decreasing the hourly emissions rate
and on projected capacity utilization. In projecting future emissions
the reviewing authority shall:

(A) consider all relevant information, including but not limited
to, historical operational data, the company's own representations,
filings with the State or Federal regulatory authorities, and
compliance plans under Title IV of the Clean Air Act; and

(B) exclude, in calculating any increase in emissions that
results from the particular physical change or change in the
method of operation at an electric utility steam generating
unit, that portion of the unit's emissions following the change
that is attributable to an increase in projected capacity utilization
at the unit that is unrelated to the particular change, including
any increased utilization due to the rate of electricity demand
growth for the utility system as a whole.

(33) "Clean coal technology" means any technology, including technologies
applied at the precombustion, combustion, or post combustion stage,
at a new or existing facility which will achieve significant reductions
in air emissions of sulfur dioxide or oxides of nitrogen associated
with the utilization of coal in the generation of electricity, or
process steam which was not in widespread use as of November 15,
1990.

(34) "Clean coal technology demonstration project" means a project
using funds (1) appropriated under the heading 'Department of
Energy-Clean Coal Technology', up to a total amount of $2,500,000,000
for commercial demonstration of clean coal technology, or (2)
similar projects funded through appropriations for the Environmental
Protection Agency. The Federal contribution for a qualifying project
shall be at least 20 percent of the total cost of the demonstration
project.

(35) "Temporary clean coal technology demonstration project"
means a clean coal technology demonstration project that is operated
for a period of five years or less, and which complies with the
State implementation plan for the State in which the project is
located and other requirements necessary to attain and maintain
the nation ambient air quality standards during and after the
project is terminated.

(36)(i) "Repowering" means replacement of an existing coal- fired
boiler with one of the following clean coal technologies: atmospheric
or pressurized fluidized bed combustion, integrated gasification
combined cycle, magnetohydrodynamics, direct and indirect coal-fired
turbines, integrated gasification fuel cells, or as determined
by the Administrator, in consultation with the Secretary of Energy,
a derivative of one or more of these technologies, and any other
technology capable of controlling multiple combustion emissions
simultaneously with improved boiler or generation efficiency and
with significantly greater waste reduction relative to the performance
of technology in widespread commercial use as of November 15,
1990.

(ii) Repowering shall also include any oil and/or gas-fired
unit which as been awarded clean coal technology demonstration
funding as of January 1, 1991, by the Department of Energy.

(iii) The reviewing authority shall give expedited consideration
to permit applications for any source that satisfies the requirements
of this subsection and is granted an extension under . 409 of
the Clean Air Act.

(37) "Reactivation of a very clean coal-fired electric utility steam
generating unit" means any physical change or change in the method
of operation associated with the commencement of commercial operations
by a coal-fired utility unit after a period of discontinued operation
where the unit:

(i) has not been in operation for the two-year period prior to
the enactment of the Clean Air Act Amendments of 1990, and the
emissions from such unit continue to be carried in the permitting
authority's emissions inventory at the time of enactment;

(ii) was equipped prior to shut-down with a continuous system
of emissions control that achieves a removal efficiency for
sulfur dioxide of no less than 85 percent and a removal efficiency
for particulates of no less than 98 percent;

(iii) is equipped with low-NOx burners prior to the time of
commencement of operations following reactivation; and

(iv) is otherwise in compliance with the requirements of the
Clean Air Act. For the reasons set forth in the preamble, Part
52 of Chapter I of Title 40 of the Code of Federal Regulations
is proposed to be amended as follows:

(iii) A physical change or a change in the method of operation
shall not include:

* * * * *

(h) the addition, replacement or use of a pollution control project
at an existing electric utility steam generating unit, unless
the Administrator determines that such addition, replacement,
or use renders the unit less environmentally beneficial, and except:

(a) when the Administrator has reason to believe that the pollution
control project would result in a significant net increase in
representative actual annual emissions of any criteria pollutant
over levels used for that source in the most recent air quality
impact analysis in the area conducted for the purpose of Title
I, if any, and

(b) the Administrator determines that the increase will
cause or contribute to a violation of any ambient standard,
PSD increment, or visibility limitation.

(i) the State implementation plan for the State in which the
project is located, and

(ii) other requirements necessary to attain and maintain
the national ambient air quality standards during the project
and after it is terminated.

(j) The installation or operation of a permanent clean coal technology
demonstration project that constitutes repowering, provided that
the project does not result in an increase in the potential to
emit of any regulated pollutant emitted by the unit. This exemption
shall apply on a pollutant-by- pollutant basis.

(iv) For any emissions unit (other than an electric utility steam
generating unit specified in paragraph (v) of this subsection) that
has not begun normal operations on a particular date, actual emissions
shall equal the potential to emit of the unit on that date.

(v) For an electric utility steam generating unit (other than
a new unit or the replacement of an existing unit) actual emissions
of the unit following the physical or operational change shall
equal the representative actual annual emissions of the unit.

(31) "Electric utility steam generating unit" means any steam
electric generating unit that is constructed for the purpose of
supplying more than one-third of its potential electric output
capacity and more than 25 MW electrical output to any utility
power distribution system for sale. Any steam supplied to a steam
distribution system for the purpose of providing steam to a steam-electric
generator that would produce electrical energy for sale is also
considered in determining the electrical energy output capacity
of the affected facility.

(32) "Pollution control project" means any physical change or
change in the method of operation, at an existing electric utility
steam generating unit for purposes of reducing emissions from
such unit. Such changes are limited to:

(i) the installation of conventional or innovative pollution control
technology, including but not limited to advanced flue gas desulfurization,
sorbent injection for sulfur dioxide and nitrogen oxides controls
and electrostatic precipitators;

(ii) a physical change, or change in the method of operation,
to accommodate switching to a fuel which is less polluting than
the fuel in use prior to the change including, but not limited
to natural gas or coal re- burning, co-firing of natural gas
and other fuels for the purpose of controlling emissions;

(iii) a permanent clean coal technology demonstration project
conducted under Title II, section 101(d) of the Further Continuing
Appropriations Act of 1985 (section 5903(d) of title 42 of the
United States Code), or subsequent appropriations, up to a total
amount of $2,500,000,000 for commercial demonstration of clean
coal technology, or similar projects funded through appropriations
for the Environmental Protection Agency; or

(33) "Representative actual annual emissions" means the average
rate, in tons per year, at which the source is projected to emit
a pollutant for the two-year period after a physical change or change
in the method of operation of a unit, (or a different consecutive
two-year period within 10 years after that change, where the Administrator
determines that such period is more representative of normal source
operations), considering the effect any such change will have on
increasing or decreasing the hourly emissions rate and on projected
capacity utilization. In projecting future emissions the Administrator
shall:

(i) consider all relevant information, including but not limited
to, historical operational data, the company's own representations,
filings with the State or Federal regulatory authorities, and
compliance plans under Title IV of the Clean Air Act; and

(ii) exclude, in calculating any increase in emissions that
results from the particular physical change or change in the
method of operation at an electric utility steam generating
unit, that portion of the unit's emissions following the change
that is attributable to an increase in projected capacity utilization
at the unit that is unrelated to the particular change, including
any increased utilization due to the rate of electricity demand
growth for the utility system as a whole.

(34) "Clean coal technology" means any technology, including technologies
applied at the precombustion, combustion, or post combustion stage,
at a new or existing facility which will achieve significant reductions
in air emissions of sulfur dioxide or oxides of nitrogen associated
with the utilization of coal in the generation of electricity, or
process steam which was not in widespread use as of November 15,
1990.

(35) "Clean coal technology demonstration project" means a project
using funds (1) appropriated under the heading 'Department of
Energy-Clean Coal Technology', up to a total amount of $2,500,000,000
for commercial demonstration of clean coal technology, or (2)
similar projects funded through appropriations for the Environmental
Protection Agency. The Federal contribution for a qualifying project
shall be at least 20 percent of the total cost of the demonstration
project.

(36) "Temporary clean coal technology demonstration project"
means a clean coal technology demonstration project that is operated
for a period of five years or less, and which complies with the
State implementation plans for the State in which the project
is located and other requirements necessary to attain and maintain
the national ambient air quality standards during the project
and after it is terminated.

(37)

(i)"Repowering" means replacement of an existing coal-fired boiler
with one of the following clean coal technologies: atmospheric
or pressurized fluidized bed combustion, integrated gasification
combined cycle, magnetohydrodynamics, direct and indirect coal-fired
turbines, integrated gasification fuel cells, or as determined
by the Administrator, in consultation with the Secretary of Energy,
a derivative of one or more of these technologies, and any other
technology capable of controlling multiple combustion emissions
simultaneously with improved boiler or generation efficiency and
with significantly greater waste reduction relative to the performance
of technology in widespread commercial use as of November 15,
1990.

(ii) Repowering shall also include any oil and/or gas-fired
unit which has been awarded clean coal technology demonstration
funding as of January 1, 1991, by the Department of Energy.

(iii) The Administrator shall give expedited consideration
to permit applications for any source that satisfies the requirements
of this subsection and is granted an extension under .409 of
the Clean Air Act.

(38) "Reactivation of a very clean coal-fired electric utility steam
generating unit" means any physical change or change in the method
of operation associated with the commencement of commercial operations
by a coal-fired utility unit after a period of discontinued operation
where the unit:

(i) has not been in operation for the two-year period prior to
the enactment of the Clean Air Act Amendments of 1990, and the
emissions from such unit continue to be carried in the permitting
authority's emissions inventory at the time of enactment;

(ii) was equipped prior to shut-down with a continuous system
of emissions control that achieves a removal efficiency for
sulfur dioxide of no less than 85 percent and a removal efficiency
for particulates of no less than 98 percent;

(iii) is equipped with low-NOx burners prior to the time of
commencement of operations following reactivation; and

(iv) is otherwise in compliance with the requirements of the
Clean Air Act.

3. Section 52.24 is proposed to be amended to read as follows:

52.24 Statutory restriction on new sources.

* * * * *

(f) * * *

(5) * * *

(iii) A physical change or change in the method of operation
shall not include:

* * *

(h) the addition, replacement or use of a pollution control
project at an existing electric utility steam generating unit,
unless the Administrator determines that such addition, replacement,
or use renders the unit less environmentally beneficial, and except:

(1) when the Administrator has reason to believe that the pollution
control project would result in an significant net increase in
representative actual annual emissions of any criteria pollutant
over levels used for that source in the most recent air quality
impact analysis in the area conducted for the purpose of Title
I, if any, and

(2) the Administrator determines that the increase will cause
or contribute to a violation of any ambient standard, PSD increment,
or visibility limitation.

(1) the State implementation plan for the State in which the project
is located, and

(2) other requirements necessary to attain and maintain the
national ambient air quality standards during the project and
after it is terminated.

(j) The reactivation of a very clean coal-fired electric utility
steam generating unit.

* * * * *

(13) * * *

(iv) For any emissions unit (other than an electric utility steam
generating unit specified in paragraph (v) of this subsection) that
has not begun normal operations on a particular date, actual emissions
shall equal the potential to emit of the unit on that date.

(v) For an electric utility steam generating unit (other than
a new unit or the replacement of an existing unit) actual emissions
of the unit following the physical or operational change shall
equal the representative actual annual emissions of the unit.

(18) "Electric utility steam generating unit" means any steam electric
generating unit that is constructed for the purpose of supplying more
than one-third of its potential electric output capacity and more
than 25 MW electrical output to any utility power distribution system
for sale. Any steam supplied to a steam distribution system for the
purpose of providing steam to a steam- electric generator that would
produce electrical energy for sale is also considered in determining
the electrical energy output capacity of the affected facility.

(19) "Representative actual annual emissions" means the average
rate, in tons per year, at which the source is projected to emit
a pollutant for the two-year period after a physical change or change
in the method of operation of a unit, (or a different consecutive
two-year period within 10 years after that change, where the Administrator
determines that such period is more representative of normal source
operations), considering the effect any such change will have on
increasing or decreasing the hourly emissions rate and on projected
capacity utilization. In projecting future emissions the Administrator
shall:

(i) consider all relevant information, including but not limited
to, historical operational data, the company's own representations,
filings with the State or Federal regulatory authorities, and compliance
plans under Title IV of the Clean Air Act; and

(ii) exclude, in calculating any increase in emissions that
results from the particular physical change or change in the method
of operation at an electric utility steam generating unit, that
portion of the unit's emissions following the change that is attributable
to an increase in projected capacity utilization at the unit that
is unrelated to the particular change, including any increased
utilization due to the rate of electricity demand growth for the
utility system as a whole.

(20) "Temporary clean coal technology demonstration project" means
a clean coal technology demonstration project that is operated for
a period of five years or less, and which complies with the State
implementation plans for the State in which the project is located
and other requirements necessary to attain and maintain the national
ambient air quality standards during the project and after it is terminated.

(21) "Clean coal technology" means any technology, including technologies
applied at the precombustion, combustion, or post combustion stage,
at a new or existing facility which will achieve significant reductions
in air emissions of sulfur dioxide or oxides of nitrogen associated
with the utilization of coal in the generation of electricity, or
process steam which was not in widespread use as of November 15,
1990.

(22) "Clean coal technology demonstration project" means a project
using funds (1) appropriated under the heading 'Department of Energy-Clean
Coal Technology', up to a total amount of $2,500,000,000 for commercial
demonstration of clean coal technology, or (2) similar projects
funded through appropriations for the Environmental Protection Agency.
The Federal contribution for a qualifying project shall be at least
20 percent of the total cost of the demonstration project.

(23) "Reactivation of a very clean coal-fired electric utility
steam generating unit" means any physical change or change in the
method of operation associated with the commencement of commercial
operations by a coal-fired utility unit after a period of discontinued
operation where the unit:

(i) has not been in operation for the two-year period prior to the
enactment of the Clean Air Act Amendments of 1990, and the emissions
from such unit continue to be carried in the permitting authority's
emissions inventory at the time of enactment;

(ii) was equipped prior to shut-down with a continuous system
of emissions control that achieves a removal efficiency for sulfur
dioxide of no less than 85 percent and a removal efficiency for
particulates of no less than 98 percent;

(iii) is equipped with low-NOx burners prior to the time of
commencement of operations following reactivation; and

(iv) is otherwise in compliance with the requirements of the
Clean Air Act.

(24) "Pollution control project" means any physical change or change
in the method of operation, at an existing electric utility steam
generating unit for purposes of reducing emissions from such unit.
Such changes are limited to:

(i) the installation of conventional or innovative pollution control
technology, including but not limited to advanced flue gas desulfurization,
sorbent injection for sulfur dioxide and nitrogen oxides controls
and electrostatic precipitators;

(ii) a physical change, or change in the method of operation,
to accommodate switching to a fuel which is less polluting than
the fuel in use prior to the change including, but not limited
to natural gas or coal re-burning, co-firing of natural gas and
other fuels for the purpose of controlling emissions;

(iii) a permanent clean coal technology demonstration project
conducted under Title II, section 101(d) of the Further Continuing
Appropriations Act of 1985 (section 5903(d) of title 42 of the
United States Code), or subsequent appropriations, up to a total
amount of $2,500,000,000 for commercial demonstration of clean
coal technology, or similar projects funded through appropriations
for the Environmental Protection Agency; or

2. Section 60.2 is proposed to be amended by adding the following
definitions:

"Clean coal technology demonstration project" means a project
using funds appropriated under the heading 'Department of Energy-Clean
Coal Technology', up to a total amount of $2,500,000,000 for commercial
demonstrations of clean coal technology, or similar projects funded
through appropriations for the Environmental Protection Agency.

"Electric utility steam generating unit" means any steam electric
generating unit that is constructed for the purpose of supplying
more than one-third of its potential electric output capacity and
more than 25 MW electrical output to any utility power distribution
system for sale. Any steam supplied to a steam distribution system
for the purpose of providing steam to a steam-electric generator
that would produce electrical energy for sale is also considered
in determining the electrical energy output capacity of the affected
facility.

"Repowering" means replacement of an existing coal-fired boiler
with one of the following clean coal technologies: atmospheric or
pressurized fluidized bed combustion, integrated gasification combined
cycle, magnetohydrodynamics, direct and indirect coal- fired turbines,
integrated gasification fuel cells, or as determined by the Administrator,
in consultation with the Secretary of Energy, a derivative of one
or more of these technologies, and any other technology capable
of controlling multiple combustion emissions simultaneously with
improved boiler or generation efficiency and with significantly
greater waste reduction relative to the performance of technology
in widespread commercial use as of November 15, 1990. Repowering
shall also include any oil and/or gas-fired unit which has been
awarded clean coal technology demonstration funding as of January
1, 1991, by the Department of Energy.

"Reactivation of a very clean coal-fired electric utility steam
generating unit" means any physical change or change in the method
of operation associated with the commencement of commercial operations
by a coal-fired utility unit after a period of discontinued operation
where the unit:

(i) has not been in operation for the two-year period prior to the
enactment of the Clean Air Act Amendments of 1990, and the emissions
from such unit continue to be carried in the permitting authority's
emissions inventory at the time of enactment;

(ii) was equipped prior to shut-down with a continuous system
of emissions control that achieves a removal efficiency for sulfur
dioxide of no less than 85 percent and a removal efficiency for
particulates of no less than 98 percent;

(iii) is equipped with low-NOx burners prior to the time of
commencement of operations following reactivation; and

(iv) is otherwise in compliance with the requirements of the
Clean Air Act.

(h) No physical change, or change in the method of operation,
at an existing electric utility steam generating unit shall be treated
as a modification for the purposes of this section provided that
such change does not increase the maximum hourly emissions of any
pollutant regulated under this section above the maximum hourly
emissions achievable at that unit during the five years prior to
the change.

(i) Repowering projects that are awarded funding from the Department
of Energy as permanent clean coal technology demonstration projects
(or similar projects funded by EPA) are exempt from the requirements
of this section provided that such change does not increase the
maximum hourly emissions of any pollutant regulated under this section
above the maximum hourly emissions achievable at that unit during
the five years prior to the change.

(j)(1) Repowering projects that qualify for an extension under
. 409(b) of the Clean Air Act are exempt from the requirements of
this section, provided that such change does not increase the actual
hourly emissions of any pollutant regulated under this section above
the actual hourly emissions achievable at that unit during the five
years prior to the change.

(2) This exemption shall not apply to any new unit that:

(a) is designated as a replacement for an existing unit;

(b) qualifies under section 409(b) of the Clean Air Act for
an extension of an emission limitation compliance date under section
405 of the Clean Air Act; and

(c) is located at a different site than the existing unit.

(k) The installation, operation, cessation, or removal of a
temporary clean coal technology demonstration project is exempt
from the requirements of this section. A "temporary clean coal
control technology demonstration project", for the purposes of
this section is a clean coal technology demonstration project
that is operated for a period of five years or less, and which
complies with the State implementation plan for the State in which
the project is located and other requirements necessary to attain
and maintain the national ambient air quality standards during
the project and after it is terminated.

(l) The reactivation of a very clean coal-fired electric utility
steam generating unit is exempt from the requirements of this
section.